How Insurance Firms Can Mitigate Farm Income Risks Using Agritech Solutions
Agriculture has always been exposed to the vagaries of nature. With climate change this vulnerability has only been accelerated, adversely impacting food production and farm incomes.
The most effective shield a farmer can get to mitigate agricultural risks is a robust insurance system. Crop insurance has existed in India since 1972, but it has been fraught with problems like a lack of transparency and non-payment/delayed payment to farmers. Agricultural insurance also suffers from low penetration of the current schemes with about 40% of total cropped area being covered, while USA has 89% farms under insurance and China over 69%.
To overcome these issues, insurance companies need to look towards the innovative technological solutions being offered by agritech startups.
Image Processing
Agtech startups now posses advanced GIS-based image processing that uses machine learning to generate valuable insights. This technology has a wide range of applications for insurance companies who need more accurate crop cutting experiments (CCEs). The startups use satellites or drones to monitor CCE. FarmGuide’s yield assessment app uses this technology and is currently being used by the government.
The same remote sensing technology can be used by insurers to assess an individual farmer’s risk of crop failure. Drone and satellite image processing can provide insights into the health of a farm’s soil and crop. Even Internet of Things (IoT) devices can be deployed for the same purpose to broadcast real-time information on farm health. This technology along with agro-advisory services can reduce the farmers’ risk of crop failure.
Information Services using IVRS
To significantly increase the coverage of crop insurance, insurers should seek agritech startups who are developing ICT-based interactive voice response systems (IVRS). This technology can be developed to create awareness among farmers about the benefits of crop insurance through marketing calls. Also, when the farmer wants to be covered they can raise the demand during the IVR call. This will help insurance companies get better quality leads. Offering agro-advisory as a value-added service for purchasing their product, insurance companies can create brand differentiation among farmers and also make sure that the farmer is adopting the best practices to avoid crop failure.
Market Intelligence
Agritech startups are generating mountains of data with their products, and it would only be logical for insurance companies to utilise these insights to improve their product coverage. The market intelligence reports generated from this data can provide insurance companies vital insights on how they chart their insurance coverage strategies into unmapped territories.
Software as a Service
Insurance companies can also engage agritech startups like Farmguide to develop custom in-house enterprise software that improves business functions. Having worked on the national crop insurance scheme at the Centre and with the Rajasthan government, Farmguide understands the needs of agriculture stakeholders like insurers. Our machine-learning SaaS can optimise business efficiencies and minimise manual process which have been identified as a major drag on insurance in India.
Digitization
Digitization of governments records will also improve the agricultural insurance mechanism in India. Agritech startups have already been engaged by the government for this purpose, and insurers can seek tech integration with these digital records to improve the efficiency of their processes and services.
To turn this vital sector around, insurance companies need to work in sync with agtech startups to deploy the widespread use of remote sensing technology in agriculture insurance programme with minimum human intervention to assess crop damage and expedite claims settlement.
